[ET Net News Agency, 25 October 2018] Citi Research said the Australian government aims
to lower retail electricity prices there by means of introducing a "price safety net",
which involves power retailers setting their prices against a default market price.
The default price will be set to ensure customers are not being penalized for being
loyal to a service provider. Such default prices will be introduced by 30 April 2019 and
savings would be passed through to end users by 1 July 2019.
The government there would also ask local power companies to cut their sales prices by 1
January 2019. These measures look adverse to CLP Holdings (00002), which had 29% 1H total
earning from power generation and retailing businesses in Australia.
Despite defensive earnings, having over 60% profit from Hong Kong with return rate fixed
for next 15 years, CLP could have earnings cut from Australia due to lower contracted
electricity sales prices in 2H and tariff cuts in 2019 under the new government policies.
At 16.2x 2019 PER, 1.7x PB and 3.7% yield, Citi maintained its "neutral" rating on CLP,
with a target price of HK$90. (KL)